The Sydney Morning Herald [print edition] April 24, 1999 Social cost of the GST just too high by Adele Horin THE Government�s boast that no Australian shall be a loser under the GST is about as sound as Bob Hawke�s infamous promise on child poverty. With every passing day, it is becoming clearer that the big losers, as things stand, will be all of us. Experts may quibble over whether pensioners will be 37 cents a week better off or $2 a week worse off. But there is no argument that Australia will be a much more unequal and divided country post-GST, unless the proposal is significantly changed. The GST measures will widen the gap between the top earners and everyone else. The rich will get richer, thanks to generous tax cuts. And even if most other Australians don�t get poorer, the result is a wider-than-ever chasm between the well-off and the rest. According to the Australian Council of Social Service, the top 20 per cent of households with annual incomes of $60,000 and above will get generous benefits � $70, $80, $90 a week in tax cuts, much more than they need to offset the costs of a GST, To this relatively privileged group flows about 50 per cent of the tax cuts, or $7 billion a year, with the greatest benefits going to households on incomes of $70,000 to $100,000. To the bottom 20 per cent flows a measly $2 billion to $3 billion in compensation, about half of which will be ripped off in higher food bills alone. Many low-income people will pay in higher prices more than they get in compensation. Put another way, individuals on $75,000 will get tax cuts of $86 a week But a million pensioners will be only a few cents better off - or possibly worse off, depending on which model the economists use. And it�s not that the well-off need such generous compensation, given their spending patterns. These are the folk who save 20 per cent of their income now, and who are more likely to buy new cars, and other items that will be cheaper under a GST. As well, 1 to 2 million Australians - self-employed on very low incomes, low wage earners without children, retir-ees, new migrants, unemployed people aged 17-20, and retrenched workers 55 and over - are also likely to be worse off. They earn too little to gain from tax cuts. But they are outside the social security system. There is, I venture, a consensus among Australians that the widening gap between rich and poor is a great concern. Even more than the Prime Minister's cherished �mateship�, Australians� belief in egalitarianism is part of our national identity. But too few connect what's happening in Canberra with the growing inequalities besetting the nation. There is a lack of understanding that the GST proposal represents a huge redistribution of income from poor to rich. One reason is that the main beneficiaries of the proposed new 30 per cent and 40 per cent tax rates are high earners on incomes around $75,000, well above the average full-time wage of $38,000. Just through the reductions in the 34 per cent and 43 per cent rates to the new levels, a person on $100,000 gains $37 a week, while someone on $30,000 gains only $8. Even if most ordinary Australians are not worse off overall under a GST, they will gain much less than higher earners. Some argue that growing inequality matters little as long as most people are not poorer for the changes. But as affluent Australians lose touch with the rest of the community, and retreat into lifestyles quite different from the average, inequality becomes a self-reinforcing phenomenon. When the affluent can avoid contact with the downwardly mobile through avoiding public transport, public schools, public hospitals, and so on, they also withdraw their willingness to fund these services. At a time when global economic forces have exacerbated inequalities, governments should not be aiding and abetting the trend. In the area of tax, governments are not powerless. But the Australian Government is redistributing income in the wrong way. At the very least the compensation package needs to be revised, and not just for pen-sioners. Any Harradine-inspired generosity from the Government must be extended to the unemployed and the other less politically powerful groups in particular danger of being screwed under a GST. ------------------------------------------------------- RecOzNet2 has a page @ http://www.green.net.au/recoznet2 and is archived at http://www.mail-archive.com/ To unsubscribe from this list, mail [EMAIL PROTECTED], and in the body of the message, include the words: unsubscribe announce or click here mailto:[EMAIL PROTECTED]?Body=unsubscribe%20announce This posting is provided to the individual members of this group without permission from the copyright owner for purposes of criticism, comment, scholarship and research under the "fair use" provisions of the Federal copyright laws and it may not be distributed further without permission of the copyright owner, except for "fair use." RecOzNet2 is archived for members @ http://www.mail-archive.com/
